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Opening Remarks for the Press Briefing of the 2022 China Article IV Staff Report
February 3, 2023
The discussions for 2022 Article IV Consultation with China took place in the first half of November last year. The projections in the Article IV Staff Report were finalized in mid–December for an Executive Board discussion that took place in mid-January. China’s 2022 Q4 GDP outcome was released after the Executive Board meeting, following which we have revised our China growth forecasts for the January 2023 WEO Update, which was published earlier this week but was not included in the Staff Report or the Staff Supplement.
The newly released January 2023 World Economic Outlook Update highlights our latest forecast for China’s GDP growth. We now project growth to increase from 3 percent in 2022 to 5.2 percent in 2023 driven by a rebound in private consumption amid the earlier-than-anticipated reopening in China.
This growth forecast is subject to a high degree of uncertainty, including due to the future evolution of the virus. Downside risks include potential economic disruptions from the current and future waves of covid infections and a sharper-than-expected slowdown in the property sector. The reopening could also lead to stronger-than-expected inflationary pressures. Upside risks to growth include an even stronger recovery in private consumption and investment.
Amid the still-negative output gap in 2023 and the prevalent downside risks, it will be important for Chinese policymakers to avoid a premature tightening of macroeconomic policies, as the support provided in 2022 will expire. In particular, a neutral fiscal stance with the composition of spending shifted toward households would support the recovery. Additional monetary policy accommodation would also help secure the recovery as slack in the economy remains significant and inflation pressures are muted.
Beyond the near-term outlook and recommended macroeconomic policies, the analysis and major policy recommendations highlighted in our Staff Report remain relevant. We would highlight the following main policy recommendations:
